Canadian minimum wages vary by province, and all are higher than the United States where the federal rate is $7.25 an hour (wages in some states and U.S. cities are higher than the national level). (Deborah Baic/The Globe and Mail)

Canadian minimum wages vary by province, and all are higher than the United States where the federal rate is $7.25 an hour (wages in some states and U.S. cities are higher than the national level).(Deborah Baic/The Globe and Mail)

Ontario will hike its minimum wage for the first time in four years on June 1, opening a growing gap with other provinces and territories amid an uncertain economy.

Premier Kathleen Wynne will raise the wage to $11 from $10.25, tying Ontario with Nunavut for the highest in the country. What’s more, her government will table a bill indexing the wage to inflation in future years, setting a high new national benchmark for the foreseeable future.

“In this calculus, we need to be concerned about small businesses … At the same time, we have to balance that with the need for people to have a living wage,” Ms. Wynne said Thursday at an inner-city café in Toronto. “We have to take care of people. The fairness agenda, as I have talked about many times, is for me an integral part of our economic well-being.”

Much like U.S. President Barack Obama, who threw down the gauntlet before Republicans with a wage-hiking plan this week, Ms. Wynne is hoping the matter will be a winning political argument, boosting her fortunes in an election that could come as soon as this spring.

But in the immediate aftermath of the announcement, reaction was divided: Some businesses praised the move towards inflation indexing, which will make raises more predictable in future; others argued the hike itself is more than they can afford.

Ontario’s play is certain to be closely watched in Quebec and British Columbia, where labour and social justice groups have historically pressured government to keep wages high. B.C. Premier Christy Clark ended a decade-long freeze – and a fight with trade unions – by dramatically increasing her province’s minimum wage to match Ontario’s in 2012. Quebec, which faced frequent rate-raising protests in the late 2000s, is not far behind, at $10.15. Ms. Wynne’s hike will now put Ontario far ahead of both and give advocates of higher minimums there a fresh target to aim for.

The $11 mark also allows other jurisdictions to raise wages while remaining lower than Ontario. After Ontario and Nunavut, it’s a substantial step down to the country’s next highest wage in Yukon, at $10.54. The lowest, in Alberta, is $9.95.

Ms. Wynne’s government can raise the wage without the approval of the legislature, but will need a new law to tie future increases to the consumer price index. That bill could become tied up in the fractious assembly and become an issue in the next election.

The move traps the opposition parties in uncomfortable positions. Oppose the new wage, and Ms. Wynne’s Liberals will accuse them of not caring about the estimated 800,000 people who will benefit from the raise. Support it and the Premier will claim victory on a key pocketbook issue, peeling away left-leaning voters from the NDP

Progressive Conservative economic development critic Jane McKenna warned that hiking the wage could cause businesses to lay off workers. “How productive is it that we’re putting more people on the unemployment?” she said.

New Democrat Leader Andrea Horwath, meanwhile, would not say whether she supports either the wage hike or the indexing plan.

The hike is meant to find middle ground between social activists, who advocate a $14 wage, and business groups, who say hiking wages too much will stunt job growth.

James Rilett, Ontario vice-president of the Canadian Restaurant and Foodservices Association, said the 7-per-cent increase will cost the average restaurant more than $9,400 a year. “It will definitely have an impact.… And it is kicking in in June, just when restaurants are hiring youths for the summer.”

Still, over the longer term, tying the minimum wage to annual change in the consumer price index is wise, Mr. Rilett said. That will ensure there are no large increases in the future.

Mauro Mila, vice-president of Bruno’s Fine Foods, a small upscale grocery chain in the Toronto region, said the rise in the minimum wage will definitely cut into already thin profit margins at the company’s four stores. He can’t just cut back on the number of workers in order to compensate, he said. “If I need two people behind the meat counter between 4 and 8 p.m., and the minimum wage goes up, I can’t have one person. I still have the same amount of service that needs to be done.”

Bruno’s pays most of its full time staff – who have experience and specific skills – well above the minimum wage, Mr. Mila said. It is the part-timers who tend to be paid at the minimum level. But he has trouble getting part-timers with a strong work ethic and the social skills to work in retail, he said. “We are not getting the productivity and the quality of work we should get for $11 an hour.”

Retail Council president Diane Brisebois pointed out that Ontario raised minimum wages by 28 per cent between 2008 and 2010, above the rate of inflation from 2008 to today. The latest decision is “bad for job creation and bad for the economy,” Ms. Brisebois said.

Meanwhile, Amelia White, who is trying to raise a child while earning minimum wage at her grocery store job, said the increase will still not be enough to make ends meet. “I have to decide if I’m going to pay for rent, hydro or buy food,” she said. “It’s not enough to take me out of poverty.”